The court ruled that the two-year limitation period for refund claims under CGST Act, 2017 is mandatory, but delays can be condoned under Article 226 for genuine hardship.
In a significant ruling, the Karnataka High Court has allowed the condonation of delay in filing GST refund claims, emphasizing the mandatory nature of the two-year limitation period prescribed under Section 54 of the Central Goods and Services Tax (CGST) Act, 2017. However, the court recognized that in cases of genuine hardship, the writ jurisdiction under Article 226 of the Constitution of India can be invoked to seek relief.
The case involved M/s Merck Life Science Private Limited, which had initially paid Integrated Goods and Services Tax (IGST) on services deemed as "export of services" but later realized the transaction was intra-State, leading to the payment of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). The company's refund application for the wrongly paid IGST was rejected due to being filed beyond the two-year limitation period.
The High Court, while hearing appeals from the Assistant Commissioner of Central Taxes and others, upheld the mandatory nature of the two-year period under Section 54 but noted that the scheme of the Act does not provide for condonation of delay. It highlighted that in the absence of such a mechanism, the writ jurisdiction of the High Court remains available to address genuine hardships.
The court further emphasized that while condoning delays, authorities must be allowed to invoke other applicable provisions, such as Sections 73 and 74 of the CGST Act, to maintain a balance between taxpayer and revenue interests.
In this particular case, the delay of six months in filing the refund claim was condoned, and the authorities were directed to consider the application in accordance with the law. The judgment underscores the court's role in providing relief where statutory schemes fall short, ensuring that no tax is levied or collected except by authority of law.
Bottom Line:
Central Goods and Services Tax Act, 2017 - Section 54 - Refund claims under GST - The two-year limitation period prescribed under Section 54 is mandatory. However, in cases of genuine hardship, the writ jurisdiction of the High Court under Article 226 can be invoked to condone delays in filing refund applications. Further, such condonation must allow the authorities to invoke other applicable provisions, including Sections 73 and 74, for remedial actions.
Statutory provision(s): Article 226 of the Constitution of India, Central Goods and Services Tax Act, 2017 - Section 54, Sections 73 and 74, Central Goods and Services Tax Rules, 2017 - Rule 89(1A).
